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Markets wait to see what Syriza will do next

The fact that Greece has voted against austerity is of little surprise, and European equity markets have managed to hold their own. It is what Syriza does next that will impact whether the last couple of weeks' gains can be held onto or not.

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IG Analyst

2015-01-26T09:43:01+0000

All trading involves risk. Losses can exceed deposits.

Source: Bloomberg

Europe has woken up to confirmation that the Greek people have voted in a new anti-austerity government. Syriza leader Alexis Tsipras and his troika counterparts will now be practising their best poker faces as renegotiation of Greece’s debt and austerity requirements looks imminent. Having spent so much time, effort and money trying to keep Greece in the family the European Central Bank will be reluctant to see that all wasted, but any flexibility offered to them could be multiplied ten-fold should other nations follow their example. EUR/USD has looked nervous for some time but these latest developments have seen it trade as low as $1.1097 this morning and parity between the euro and the US dollar looks increasingly likely.

Quietly in the background, while the focus has been shifted to European politics, US light crude has been drifting lower, regardless of already being oversold. This morning’s value of $44.70 maintains the momentum towards $40.

Following last week’s statement from British Gas this morning’s statement from SSE that it will be reducing household gas bills by 4.1% has been well signposted. The accompanying statement that dividends would be maintained has probably had more of a contributory effect to the shares' 1.7% climb this morning.

Willie Walsh will be hoping it's third time lucky as he has improved his offer for Aer Lingus up to €2.55 per share. Notwithstanding the scrutiny the extra landing slots at Heathrow would create with the competition board, the fact that Ryanair holds a 29.9% stake in its Irish counterparty should ensure that there are still a few twists and turns to come.

A selloff at the end of last week triggered by Greek election fears has been followed up by markets expecting a weaker start to trading in US equities this afternoon. This malaise has not been helped by the fact this US reporting season has been considerably less punchy than previous quarters. Next up today is the turn of Microsoft and Texas Instruments, but Tuesday's offering of Caterpillar, Pfizer, Apple, Yahoo!, AT&T and Procter & Gamble looks considerably meatier.

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